Microsoft is reportedly moving ahead quickly with development of a smartwatch, having reached the prototype stage of a 1.5-in. device running on a modified Windows 8 housed in a translucent aluminum case.

In addition to the housing made of an expensive material called oxynitride aluminum, the watch will have removable wrist bands in blue, red, yellow, black, white and gray, AmongTech reported Friday, citing trusted, unnamed sources.

The aluminum is 80% transparent, but four times harder than glass. What may be the broadest-reaching innovation is that the device won't completely rely on a Bluetooth connection to a smartphone as many smartwatches would, and instead will include an LTE wireless chip, 6 GB of internal storage and a connection to cloud storage. Still, the watch can be used to communicate with a smartphone for some functionality, AmongTech's sources said.

Previous reports have indicated that Microsoft has been taking bids for 1.5-in. displays from manufacturers. The Verge also reported today, citing unnamed sources, that Microsoft has moved the prototype testing of the watch to its Surface team of developers and designers. The work was previously done by the company's Xbox accessories group.

The switch of the prototype to the Surface team could be a reflection of Microsoft's reorganization announced last week, which refocuses the company along a "devices and services" concept previously outlined by CEO Steve Ballmer.

Various reports have suggested a Microsoft Surface watch could appear in 2014, which would be later than the rumored iWatch from Apple due out presumably this fall. Sony, meanwhile, revealed its third-generation SmartWatch 2 on June 25, with a 1.6-in. display, but no pricing or availability was announced.

Analysts have been skeptical about the potential market for smart watches, but others have said that Apple will help create interest with its device, as it did with the iPhone six years ago. Sony expects 41 million smart watches to be sold by 2016, but that's a small fraction of the nearly 1 billion smartphones sold globally in a year.